Demand for steel in China is expected to rise 4.1 percent in 2013, as the nation's economic growth gets back on track, according to a forecast from an industry think tank.

The 2013 China Steel Demand Forecast also predicted a decline in iron ore prices due to increasing supplies and slow growth in the global manufacturing sector.

A worker cuts steel bars at a steel mill in Huaibei, Anhui province. [File photo/ China Daily]

The report, released on Tuesday by the China Metallurgical Industry Planning and Research Institute, forecast that steel demand in China will reach 666 million metric tons in 2013.

Actual consumption of steel in China was 640 million tons in 2012, an increase of 3.6 percent on the previous year.

Crude steel output in 2013 will reach 746 million tons, up 4.2 percent. The report said the figure for 2012 is estimated to be 716 million tons, up 4.5 percent year-on-year.

Li Xinchuang, head of the institute, said the positive factors creating the conditions for the increase in demand include new consumption-stimulating policies, fast-growing investment from the private sector, and rapid urbanization.

But he warned that the industry will continue to be haunted by overcapacity and narrowing profit margins, as well as rising labor and costs, and a weak global economy.

In 2012, steel's downstream industries such as mechanical and home appliances slowed their development, with shipbuilding and containers experiencing negative growth, the report said.

The report estimated that most of the industries will keep growing in 2013, apart from containers and home appliances, which will see flat growth, and the shipbuilding industry, which will continue to decline.

Zhang Lin, an analyst from steel industry research institute LGMI Research, told China Daily that the industry will recover next year.

But she said the key to this lies in whether newly approved projects including railway construction, subways and airports will be implemented with sufficient funds.

The institute's report predicted a continued fall in iron ore prices in 2013 compared with this year.

"The slowdown in global manufacturing industries, increased iron ore production at home and abroad, and new mines have dragged prices down," said Li.

Iron ore prices fell to less than $90 per ton in August, their lowest level in three years. Prices rebounded slightly after the government approved a series of measures to boost infrastructure construction projects to support the economy.

The report also forecast iron ore demand of 1.1 billion tons in 2013, a year-on-year rise of 4 percent. Of this, imported iron ore will account for more than 60 percent. Iron ore imports are expected to reach 760 million tons in 2013.

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